Statement from the Independent Restaurant Coalition on the FTC’s Decision to Exclude Restaurant Service Charges in Junk Fee Ruling

The Independent Restaurant Coalition (IRC) is grateful to the Federal Trade Commission (FTC) for their thoughtful decision to exclude restaurant service charges from the recent ruling on junk fees. This decision is a testament to the FTC's understanding of the unique challenges faced by independent restaurants and bars, and reflects a commitment to the support of a crucial mechanism that many neighborhood businesses rely on to guarantee our vitality.

Service charges play a crucial role in the financial stability of independent restaurants, allowing operators to ensure fair and equitable compensation for their entire team. By choosing not to categorize these charges as “junk fees,” the FTC recognizes that service charges are not only transparent, but also essential in helping restaurants bridge the wage gap between front of house and back of house employees. This ruling affirms that service charges are a legitimate and necessary part of a restaurant’s business model, designed to meet the evolving needs of both employees and customers.

"At the Independent Restaurant Coalition, we’ve dedicated ourselves to ensuring that policymakers and the Federal Trade Commission understand how vital it is for restaurants and bars to have the flexibility to use service charges for employee compensation,” says Erika Polmar, Executive Director, Independent Restaurant Coalition. “By educating lawmakers, the IRC is advocating for a future where independent restaurants can thrive and continue to be cornerstones of their communities." 

The Independent Restaurant Coalition has been a proactive and vocal advocate in the ongoing debate in support of restaurant service charges. On February 7, 2024, the IRC submitted a formal comment to the FTC’s Notice of Proposed Rulemaking, Trade Regulation Rule on Unfair or Deceptive Fees, 16 CFR 464, outlining the critical role that service charges play in ensuring fair wages for all employees in independent restaurants and bars. Additionally, in March, the IRC organized a roundtable discussion to engage policymakers and industry stakeholders, which culminated in an April letter from Congressman Earl Blumenauer urging the FTC to consider the needs of independent restaurants and bars. Throughout spring and summer, the IRC rallied hundreds of restaurant owners and workers to contact lawmakers, through social media, newsletters and public engagements, amplifying the message that service charges are an essential tool for fair compensation. The IRC is grateful that the FTC heeded our ongoing requests, listened to the unique needs of the restaurant industry and ruled in favor to support equitable pay models within the industry.

“Service fees in restaurants are not junk fees; they are essential tools that allow us to fairly compensate our entire team,” says Nya Marshall, Owner, Ivy Kitchen, Detroit. “At Ivy Kitchen, these fees help bridge the wage gap between the front and back of the house, ensuring that everyone who contributes to our guests' experience is paid equitably. The Federal Trade Commission should recognize that these fees support a more just and sustainable compensation model in the hospitality industry."

"Our service charge has given us the resources to close the wage gap between front of house and back of house, providing a fairer and more equitable model in which to run our business,” says Paul C. Reilly, Culinary Director/Proprietor, Beast + Bottle Group and Coperta restaurant, Denver, CO. “It also gives us the liberty to provide additional benefits to our team that we have not been privy to before." 

"At Tail Up Goat, we believe in a compensation model that fosters equity, stability, and consistency for our entire team. That's why we add a 22% service fee to every bill, with 100% of those charges distributed directly to our non-management employees in the form of wages and benefits,” says Jill Tyler, Owner, Tail Up Goat and Reveler’s Hour, Washington, D.C. “These service charges are not 'junk fees'—they are a vital part of ensuring fair compensation for both our kitchen and dining room staff and we are grateful that the FTC recognizes the important role they play in our small businesses" 

The IRC extends its appreciation to the FTC for taking the time to understand the intricacies of the restaurant industry and for making a decision that supports the wellbeing of small business owners, employees, and diners alike. The IRC remains committed to advocating for policies that protect and strengthen independent restaurants and bars, and coalition members are thrilled to see this positive step forward.